Prime Minister Mark Carney confirmed today that the Liberal government will abandon plans to increase taxes on capital gains, a significant reversal just days before an anticipated federal election call.
The proposed tax measure, initially introduced in the 2024 federal budget, aimed to increase the inclusion rate on capital gains for businesses and individuals reporting more than $250,000 annually. The move was expected to generate approximately $19.4 billion over five years but faced intense backlash from technology sector leaders and various professional associations.
Carney, who recently secured the Liberal leadership, emphasized that withdrawing the planned tax change is aimed at encouraging entrepreneurship and business innovation. “This decision will empower Canadian businesses to invest, grow, and take necessary risks without additional tax burdens,” Carney stated.
Although the broader capital gains tax hike will not proceed, the Liberals maintain their commitment to increasing the lifetime capital gains exemption limit for small business shares and certain farming and fishing equipment sales. The exemption limit would rise from $1 million to $1.25 million, though this legislative action will be pursued only after the upcoming election.
The Canada Revenue Agency (CRA) had originally planned to administer the tax changes ahead of formal legislation but halted these plans after then-Finance Minister Dominic LeBlanc delayed the measure earlier this year. The CRA confirmed that any taxpayers who overpaid due to the anticipated changes will receive reassessments and adjustments.